Mixed fortunes for U.K. insurers

Miners push FTSE 100 higher; WPP rises after upgrade

SarahTurner

LONDON (MarketWatch) -- Earnings updates from two smaller British insurance companies highlighted contrasting market conditions in the sector on Friday.

On the one hand, Brit Insurance Holding (BRE) gained 2.3% after saying it expects to report a first-half pretax profit of about 110 million pounds, which would be materially ahead of forecasts.

"The Lloyds insurance vehicles are still enjoying a period of high profitability which has driven share prices higher this year," noted analysts at Dryden Financial.

However, Goshawk Insurance Holdings (GOS) dropped 4% after it warned that some offshore energy catastrophe losses in its marine business will have a negative impact on first-half results.

The company added that, assuming catastrophe activity is at normal levels in the second half of the year, the company expects to see an "acceptable, if reduced," outcome in 2005.

"Given the short-tail catastrophe reinsurance focus of Goshawk's underwriting portfolio, first-half profits are typically only a small proportion of full-year earnings and therefore it doesn't take much to impact the interim result," said analysts from Numis Securities.

More broadly, the benchmark FTSE 100 (UKX) added 0.82% at 5,312, as mining stocks reversed a week of losses to trade strongly and as oil and telecom stocks also rose.

The company said a U.S. Food and Drug Administration panel intends to review the pre-market approval application for the company's Birmingham hip resurfacing implant system. The review will take place on Sep. 8.

Dryden said that the FDA decision meets the company's best expectations and comes after the company announced plans to sell its joint venture with Beiersdorf (520000).

In other health-care sector news, Shire Pharmaceuticals
SHPGY
(SHP) ended up 0.1% after it confirmed overnight that it is in preliminary discussions with Barr Pharmaceuticals
BRL, -11.11%
about a deal that would allow Barr to launch a generic version of Adderall XR before 2018.

"Since the market had generally assumed that Shire would try to negotiate an agreement with Barr if at all possible, this is not really news as such, and in our view makes it no more or less likely that Shire will actually manage to do a deal," said analysts from Nomura Securities.

Retail analysts were still digesting Thursday's retail sales figures, which showed a 0.3% fall in July, which was better than the 0.5% expected decline.

"Conflicting fortunes continue within sectors according to the ONS figures, with food retailers performing well and the non-food universe struggling to make headway," Credit Suisse First Boston said.

Also, privately owned major British department store and supermarket operator John Lewis reported on Friday that sales in the week ended Aug. 13 slipped 2.7% at its department stores but rose 13.5% at its Waitrose food stores.

"Our weekday trade proved challenging last week with our customers clearly taking full advantage of the glorious weather that we had," the company said.

And discount clothing retailer Matalan (MTN) edged 0.4% lower on reports it plans to cut 300 jobs, from a staff of around 14,000. Each of the company's 190 stores will lose one member of staff under the restructuring.

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